Eye on the News

Dont uncork the champagne bottles just yet. Republicans won the House and came close to taking the Senate in yesterdays midterm elections, but while the victories make it all but impossible for President Obama to further his fiscal revolution with epochal new legislation, they may not be sufficient to undo the damage that has already been done.

In The Economic Consequences of the Peace, John Maynard Keynes wrote that the best way to destroy the Capitalist System was to debauch the currency through a continuing process of inflation, one that allowed governments to confiscate, secretly and unobserved, an important part of the wealth of their citizens. If inflation is the best way to destroy a free-market economy, Peter Dreier, an advisor to Obamas 2008 campaign, deserves credit for discovering the second-best way. In his new study of the president, Radical-in-Chief, Stanley Kurtz cites a 1979 essay, The Case for Transitional Reform, in which Dreier envisioned a progressive politics that would undermine Americas market economy by injecting unmanageable strains into the capitalist system, strains that precipitate an economic and/or political crisis. In Dreiers prophecy, a revolution of rising entitlements and an expansion of state activity and budgets would bring about a fiscal crisis and lead to a vast expansion of government authority over the economy.

Three decades later, Dreiers vision of an ever more rapacious public sector inexorably confiscating the wealth of the productive element of the nation is becoming a reality. In The Case Against the Fiscal Stimulus, Harvard economist Jeffrey Miron lays bare the unstated purposes that animate Obamas economic policies. The administrations true goals were not just economic stimulus, Miron argues. Instead, the Administration wanted to reward its constituencies (unions, environmentalists, public education) and increase the size and scope of government. This tactic is consistent with the Administrations policies in general. Across the board, it has taken a big government, redistributionist approach, whether regarding housing, unions, health, the auto industry, trade, antitrust, or financial regulation.

Yet even as voters said No we wont on Tuesday, it is not clear that the Republicans they tapped to deliver their rebuke will have enough power to resist Obamas efforts to enlarge the public sector. The president has vowed hand-to-hand combat with Republican lawmakers to protect his expansionist policies, and has done so in the knowledge that he will wield the most formidable artillery in the contest. Republican budget-trimmers in Congress in the 1990s, in their skirmishes with Bill Clinton over spending, never did find a reliable way to overcome the veto power of the presidency.

To undo the Obama administrations policies, Republicans will almost certainly need to win the White House in 2012. Yet achieving that goal wont be easy. In spite of yesterdays Republican wave, Democratic senatorial candidates Harry Reid of Nevada, Richard Blumenthal of Connecticut, Barbara Boxer of California, Chris Coons of Delaware, and Kristen Gillibrand of New York were all able to win; in Pennsylvania and Illinois, the GOP Senate candidates won by small margins. Liberal demographers like Ruy Teixeira of the Center for American Progress believe that the changing complexion of the electorate will make the political environment in 2012 considerably tougher for Republicans. Teixeira argues that as the number of non-Hispanic white voters falls, relative to the overall population, growing nonwhite minorities will continue to favor the Democrats. Liberal demographers might not be right when they argue that minority votersparticularly Latinosare likely to prove decisive in the next presidential contest, but Republicans would be foolish to underestimate the challenges that confront them.

President Obama, for his part, is gambling that the liberal demographers are right. As early as July, the White House began to turn away from the rhetoric of postracial unity that Obama used in the 2008 campaign and to experiment with a rhetoric of racial and ethnic revanchism. The Republicans, if you do the math, a Democratic insider told the Washington Posts Michael D. Shear, cannot be successful as a national party if they continue to alienate Latinos. In June, when a group of Latino activists visited the president in the White House, top aide Valerie Jarrett made one thing clear to them: The White House plans to use the immigration debate to punish the GOP and aggressively seek the Latino vote in 2012. The president was clearly following the new electoral counsel of discipline and punish in his now notorious interview on Unavision, in which he called on Latinos to punish our enemies and reward our friends. Appealing to racial and ethnic sentiment to preserve a revolution that undermines the American free-market system is, to say the least, a cynical strategy: if it succeeds, it will enfeeble the very culture of opportunity that distinguishes the United States from the economically stagnant countries from which so many American Latinos have fled.

The magnitude of the electorates remonstrance against public-sector absolutism was impressive, but it is too soon to say whether Obamas effort to repeal (or at all events drastically to revise) the American dream as it has been understood since the days of Lincoln has really been defeated.

Michael Knox Beran is a contributing editor of City Journal and the author of the forthcoming Pathology of the Elites: How the Arrogant Classes Plan to Run Your Life.

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